Technology v. Technocracy: Fintech as a Regulatory Challenge

62 Pages Posted: 27 Feb 2020 Last revised: 26 Mar 2024

Date Written: February 27, 2020


Technology is a tool. How to use it, for what purposes and to what effects, is a choice. What does this choice involve in the context of fintech? And how can it be translated into a coherent strategy of fintech regulation? These questions are at the heart of this article. Taking a broad view of fintech as a systemic force disrupting the very enterprise of financial regulation, as opposed to any particular regulatory scheme, the article offers a conceptual framework for the development of a more cohesive and effective public policy response to fintech disruption.

The article argues that the currently dominant technocratic model of financial regulation is inherently limited in its ability to respond to systemic challenges posed by fintech. The existing regulatory model operates primarily through the mechanisms of structural compartmentalization, bureaucratic specialization, and narrow targeting of isolated and well-controlled micro-level phenomena. Fintech, however, is transforming financial markets in ways that directly undermine the basic premises underlying this technocratic paradigm. Exploring these dynamics, the article develops a five-part taxonomy of the key tech-driven changes in the structure and operation of the financial system, and the corresponding challenges these systemic shifts pose to the continuing efficacy of the regulatory enterprise.

This exercise reveals the fundamental tension at the core of the fintech problem. In the fintech era, the financial system is growing ever bigger, moving ever faster, and getting ever more complex and difficult to manage. The emerging regulatory responses to these macro-level changes, however, continue to operate primarily on the micro-level. The article surveys current efforts to regulate fintech—including regulatory “sandboxes,” special charters, and RegTech—and highlights the limiting effects of the technocratic bias built into their design. Against that background, it outlines several alternative reform options that would explicitly target the core macro-structural, as opposed to micro-transactional, aspects of the fintech challenge—and do so in a more assertive, comprehensive, and normatively unified manner.

Keywords: fintech, RegTech, financial regulation, systemic risk, financial stability, cryptoassets, regulatory sandbox, fintech charter, BigTech, Libra, CBDC, central banking, Federal Reserve, financial innovation, Bitcoin, blockchain, DLT, smart contract, AI, roboadvice, financial market infrastructure.

Suggested Citation

Omarova, Saule T., Technology v. Technocracy: Fintech as a Regulatory Challenge (February 27, 2020). 6 J. Fin. Reg. 1 (2020), Cornell Legal Studies Research Paper No. 20-14, Available at SSRN:

Saule T. Omarova (Contact Author)

Cornell University - Law School ( email )

Myron Taylor Hall
Cornell University
Ithaca, NY 14853-4901
United States

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